it’s not really cities that are doing well, but certain kinds of cities, suburbs, and towns. It’s really the places with high levels of human capital. To understand the real pattern, read Enrico Moretti’s The New Geography of Jobs. The engineer-heavy suburbs of Fremont or Milpitas are doing great, as are college towns like Ann Arbor and Gainesville. Meanwhile, big cities like Baltimore and St. Louis are still stagnating and crime-ridden, while others such as Detroit and Cleveland have only just now started climbing up out of their Rust Belt doldrums. It’s not city vs. country, it’s innovation hubs vs. old-economy legacy towns.
.. Many American cities remain extremely segregated, especially between black residents and others. Chicago is a thriving, diverse, fun, relatively safe metropolis – unless you go to the poor black areas, in which case you’re in “Chiraq“.
.. the most segregated cities in America include places like Chicago, Milwaukee, Philadelphia, St. Louis, Baltimore, and Cleveland. Those are precisely the places that are having the most difficulty adapting to the new, innovation-based economy. And those tend to be the places where crime rates have rebounded to their early 1990s highs, or never really fell in the first place.
.. Either America succeeds as a polyracial nation, or it doesn’t succeed at all.
JPMorgan Software Does in Seconds What Took Lawyers 360,000 Hours
The program, called COIN, for Contract Intelligence, does the mind-numbing job of interpreting commercial-loan agreements that, until the project went online in June, consumed 360,000 hours of work each year by lawyers and loan officers. The software reviews documents in seconds, is less error-prone and never asks for vacation.
.. After visiting companies including Apple Inc. and Facebook Inc. three years ago to understand how their developers worked, the bank set out to create its own computing cloud called Gaia that went online last year. Machine learning and big-data efforts now reside on the private platform, which effectively has limitless capacity to support their thirst for processing power.
.. JPMorgan will make some of its cloud-backed technology available to institutional clients later this year, allowing firms like BlackRock Inc. to access balances, research and trading tools. The move, which lets clients bypass salespeople and support staff for routine information, is similar to one Goldman Sachs Group Inc. announced in 2015.
JPMorgan’s total technology budget for this year amounts to 9 percent of its projected revenue — double the industry average, according to Morgan Stanley analyst Betsy Graseck. The dollar figure has inched higher as JPMorgan bolsters cyber defenses after a 2014 data breach, which exposed the information of 83 million customers.
.. Another program called X-Connect, which went into use in January, examines e-mails to help employees find colleagues who have the closest relationships with potential prospects and can arrange introductions.
Have Americans Given Up?
A new book by Tyler Cowen argues that when it comes to innovation and dynamism, the country is all talk.
.. Caught in the hypnotic undertow of TV and video games, they are less likely to go outside.
.. the federal government itself has transformed from an investment vehicle, which once spent a large share of its money on infrastructure and research, to an insurance conglomerate, which spends more than half its money on health care and Social Security. A nation of risk-takers has become a nation of risk-mitigation experts.
.. Cowen’s thought-provoking book emphasizes several causes, including
- geographic immobility,
- housing prices, and
- monopolization.
.. Americans used to move toward productivity and jobs .... today, the most popular destinations for movers aren’t productive cities, but rather cheap sunny suburbs... High housing costs in the most productive metro areas have turned places like Silicon Valley and Manhattan into playgrounds for plutocrats. Tighter land-use regulations in rich metros pushed up housing values.. lower-income families, who would benefit from living near these bustling job centers, can’t afford to move there. As a result, rich young college graduates have clustered in a handful of cities while the rest of American movers are going to sunbelt suburbs with cheap housing... the decline in entrepreneurship has coincided with the rise of new monopolies—across retail, healthcare, and tech—that make it harder to start a new successful firm in these industries. Starting in the late 1970s, antitrust regulators stopped cracking down on large companies as long as they provided cheap products for consumers. Since 1978, the share of U.S. firms that are startups has fallen by 50 percent... I asked Cowen whether he regarded Trump as the outcome of American complacency or as a kind of vaccine that would cure Americans of their indolence. He sided with the former, explaining that he had long thought that a constitutional crisis or a figure like Trump becoming president might happen in the distant future. He also said that in many ways, Trump is the perfect manifestation of a country that has lost interest in new ideas. “Make America Great Again” is an appeal to nostalgia, a promise to bring back the economics and culture of the 1950s, not to do anything new... Today’s algorithmic media, like Facebook, Pandora, and dating apps, specializes in offering users content that is “optimally new”—familiar, yet surprising. Cowen argues that these technologies wall off anything that is too novel, which feeds complacency.. Cowen is right that American elites have clearly sorted themselves into like-minded, high-income communities that pass rules against new housing construction, which isolates them from the rest of the country. But they are also restless strivers. Americans work longer hours than almost any similarly rich country in the world, and rich Americans work more than they did 30 years ago. As their leisure time has declined, affluent couples spend significantly more money on their children than they used to, providing for an expensive portfolio of tutoring, music lessons, and summer camps... You might say that this obsession with status—not only obtaining it in one generation, but also devoting one’s life to protect it for the next generation—is the perfect example of Cowen’s thesis that American parents are obsessed with mitigating risk and avoiding change. But children of the elite are more likely to move multiple times between cities, live in multicultural metros, start companies, and experiment with different jobs. How complacent can a class be if it’s producing tens of thousands of anxious, restless maximizers?.. In other words, America didn’t completely lose the dream. Rather, the only dreamers left are immigrants... several studies have shown that many U.S. workers don’t start new companies because they’re afraid of losing their employer-sponsored health insurance. A single-payer system might increase overall entrepreneurial activity.
The Digital Age Produces Binary OutcomesDefense R&D and Innovation
Defense R&D and Innovation
The digital age produces binary outcomes. Winners tend to win overwhelmingly—in war as well as in business. The Soviet Union crumbled in the late 1980s when American technology bested Soviet military spending, then estimated at a quarter of GDP.
.. America emerged from the Cold War with a degree of military superiority greater than any country in modern history. It also emerged with a technologically driven economy that had no real competitor, with Russia close to ruin after the collapse of Communism and China in an early stage of economic development.
.. The military balance between the West and the Soviet Union shifted several times during the Cold War until the digital revolution gave the United States a definitive edge.
.. Military strength and economic strength often rely upon the same policy foundations.
.. Without aggressive countermeasures, we risk losing it entirely.
.. If the Eisenhower administration had not responded to Sputnik with massive funding for basic research and scientific education, or if John F. Kennedy had not proposed the moon shot after Yuri Gargarin’s first flight into space, or if public funds had not been channeled into private research facilities to meet military needs, or if Ronald Reagan hadn’t undertaken the Strategic Defense Initiative—we would be living in a different world.
.. Russian surface-to-air missiles and artillery as well as guided anti-tank weapons gave the advantage to Soviet-aligned Egypt in the largest air and tank battle since World War II, the 1973 Yom Kippur War
.. Calculating men concluded that Russia would win an air and land war with the United States in Europe, which meant that Russia had the upper hand in the Cold War.
.. Then came the militarization of the microchip. During the Syrian collapse in June 1982
.. In less than a decade, the American military (with some contributions from Israel) reversed what had appeared to be a decisive Soviet advantage in air combat and established overwhelming American superiority.
.. That and the threat of the Strategic Defense Initiative persuaded Russia’s leaders that America would win a conventional war, which set in motion the collapse of Communism.
When DARPA set out to create a communications system with multiple pathways for national security reasons, no-one had the slightest notion that this would create the Internet. When the Defense Department contracted RCA Labs in the 1970s to develop ways to illuminate night-time battlefields, no-one could have foreseen that the semiconductor laser would revolutionize telecommunications. And when the Defense Department commissioned RCA Labs to develop light and energy-efficient information processors to analyze weather data in the cockpits of military aircraft, no-one expected that the outcome would be mass production of inexpensive chips by the CMOS method.3
.. America dominated world economic life to a degree not achieved since the highpoint of the British Empire during the nineteenth century.
.. America dominated world economic life to a degree not achieved since the highpoint of the British Empire during the nineteenth century.
.. Within the shrinking defense R&D budget, a disproportionate share has been squandered on the F-35
.. select Russian and Chinese advances already limit America’s strategic freedom of action. Russia’s S-400 air defense system, for example
.. Russia has already agreed to sell the system to China, which means that China could sweep the skies above Taiwan. China has two weapons systems that may be able to sink American aircraft carriers, the Dong Feng 21 surface-to-ship missile and the Type 039A diesel electric submarine
.. The deployment of the S-400 in Syria, moreover, made short work of American proposals for a no-fly zone in that country.
.. Many military breakthroughs—such as Israel’s Iron Dome missile defense system—depend on the quality of algorithms and the speed of computation rather than on changes in hardware.
.. China has made advances in technologies that represent a strategic threat
.. satellite-killer missiles and hypersonic weapons delivery vehicles
.. there has been a steady accretion of technological advantages that, combined, pose a threat to American strategic superiority over a ten- to twenty-year horizon
.. The Nobel Prize–winning Professor Robert Mundell, the father of supply-side economics, showed (along with other economists) that chronic trade imbalances stem from demographic shifts.
.. As China’s demand for savings tapers off during the next decade, its trade surplus should gradually fall. This trend is consistent with Chinese policy
.. The seven technologies listed below constitute the basic elements of all modern electronics from computers to smart phones; in each case, their manufacture has migrated to Asia because Asian governments adopted the formerly American practice of supporting basic R&D.
.. China now graduates twice as many STEM Ph.D. candidates as the United States does each year.
A New R&D Policy Agenda
The simplest and most direct response would be to require domestic production for all sensitive defense-related goods, including all computers, displays, integrated circuits, sensors, and other high-technology equipment used in defense applications. In other words, for certain important categories of security-related manufactures, the tariff should be infinite.
This is the only reliable way to ensure that American manufacturers will bring production, including critical parts of the supply chain, back to the United States.
.. Targets for future scientific research should include (but of course are not limited to):
- Defeating the current generation of Russian air defense systems
- Enhanced use of drones in place of manned aircraft
- Hardening of satellites against prospective enemy attack
- Cyber warfare
- New physical principles in computing (e.g., quantum computing)
- Quantum communications and encryption
- Detection of ultra-quiet submarines (the present generation of Chinese diesel-electric boats are practically undetectable, and submarine drones could be used to deliver nuclear weapons to coastal cities)
- Detection and defeat of the next generation of hypersonic missiles
- Countermeasures against anti-ship missiles (rail guns, laser cannon)
.. there is a close relationship between federal R&D spending and productivity growth.
.. It is noteworthy that productivity growth tracks federal rather than overall R&D spending. That is because research that leads to fundamental breakthroughs is more likely to be funded for defense and aerospace needs.
..
The challenges to American growth and productivity today are arguably even greater than they were when Jimmy Carter left office in 1981. ..
- America’s population is aging rapidly: 15% of the total population will be 65 or older in 2015, rising to 20% by 2030.
- America had little foreign competition as a venue for entrepreneurial startups in the 1980s: the world’s capital and talent had nowhere to go but the United States. Now there are numerous competing venues for technological entrepreneurship.
- Several rising Asian powers, particularly China, have acted aggressively to close the technology gap with the United States, and they have leapfrogged American manufacturing in a number of key industries.
- Federal debt was only 30% of GDP in 1979 (not counting unfunded entitlements) but rose to 110% in 2015.
- Obstacles to growth at the end of the Carter administration—a 70% top marginal tax rate and an inflationary monetary policy—were easier to identify and remedy than contemporary challenges.
- America’s backlog of productivity-enhancing technologies has shrunk, in large part because defense R&D is half of what is was in the late 1970s relative to GDP.
.. Absent innovation, entrepreneurs will find other things to do, such as designing new financial derivatives.
.. Kennedy’s moon shot and Reagan’s Strategic Defense Initiative had such lasting economic reverberations because they were accompanied by tax cuts and regulatory relief that made it easier for entrepreneurs to capitalize on basic scientific innovations.
.. There is a strong case, however, for using government funds to seed new companies that can develop innovative technologies. In an ideal world, the venture capital community would assume this function. But in the real world, the requirements of defense R&D and production require public funding.
.. the most productive investments are the ones that test the frontiers of physics. These projects enabled us to fight the next war, not the previous one.